Vol. VI, No. 5, October/November 2006
Impact of economic changes on consumers
When the economy takes a hit, consumers cut back on discretionary spending on visits to location-based leisure venues. But a recent survey shows that some socio-economic groups are far more impacted by changes in the economy than are others, which underlines the importance of carefully targeting your LBL customers.
Businesses plan for long-term profitability. However, economies and economic conditions are never stable. There are ups and downs. Recessions, terrorist acts, oil prices, interest rates and many other factors have significant impact on consumer spending and their visits to location-based leisure venues.
A July 2006 survey of 1,020 adults by The Boston Consulting Group demonstrates how the impact of negative economic changes do not cut equally across all socio-economic groups — some are much more vulnerable than others. In examining the effect of high gas prices on consumer spending during the summer, the survey found the impact on households with less than $75,000 annual income was significant. The following chart shows the survey results:
| Impact on High Summer Gas Prices | ||||
|---|---|---|---|---|
| Annual Household Incomes | Under $35,000 | $35,000-$74,999 | $75,000-$99,999 | over $100,000 |
| Change vacation plans | 45% | 41% | 27% | 16% |
| Buy less expensive alternatives to regularly bought products | 50% | 38% | 23% | |
| Cut back on entertainment activities | 50% | 45% | 36% | 16% |
| Delay purchase of necessity | 61% | 54% | 41% | 30% |
| Eat out less | 55% | 47% | 32% | 26% |
| Scale back on spending habits of lifestyle in general | 67% | 55% | 42% | 26% |
| Worry about having enough money to maintain their lifestyles | 64% | 45% | 39% | 27% |
This demonstrates the importance of targeting specific socio-economic groups with entertainment, dining and other tainment offerings, as lower socio-economic groups, especially those with incomes under $75,000, will cut back on these discretionary items. Higher socio-economic households are much less vulnerable to cutting back on entertainment, dining out and other discretionary expenditures. Higher income customers tend to make purchase decisions more on value than on price. Those customers can offer a location-based leisure business a much more stable revenue stream and not put it at risk of needing to cut prices to maintain revenues during down economic times.
